How Blockchain Is Providing The Insurance Industry The Opportunity Of The Future
Blockchain and smart contracts have enabled the development of new approaches in the insurance industry, as they begin to replace outdated business models (with excessive paperwork, communication problems, multiple data operating systems and duplication of processes and the inability of syndicates to mine their data). By digitizing payments and assets — thus eliminating tedious paperwork — and facilitating the management of contracts, the blockchain, and smart contracts can help cut operational costs and improve efficiency. Smart contracts also allow for automation of insurance claims and other processes as well as privacy, security, and transparency. It is estimated that roughly one-third of blockchain use cases are in the insurance industry.
How will blockchain and smart contracts transform the insurance industry?
- Quick and efficient processing and verification of claims, automatic payments — all in a modular fashion, thus minimizing paperwork.
- Transparency, minimizing fraud, secure and decentralized transactions, reliable tracking of asset provenance and improving the quality of data used in underwriting. Besides improving efficiency, this also reduces counterparty risks, ensuring trust and safety both from the insurer’s and customer’s perspective. By computing at a network, rather than individual, company level, the consumer is reassured that the process was completed appropriately and as agreed upon. From the perspective of the insurance company, this fosters trust, as well, and encourages consistency, as the blockchain provides transparent and permanent information about the transactions.
The insurance industry has traditionally been associated with tedious administration, paperwork, and mistrust; the incorporation of the blockchain, however, has the ability to transform this image by bringing operational efficiency, security, and transparency. The long-term strategic benefits of blockchain are thus clear.
Recognizing the benefits of blockchain and smart contracts, the insurance industry has begun to explore their potential. With the traditional insurance model, validating an insurer’s claim is a lengthy, complicated process. Blockchain has the ability to combine various resources into smart contract validation. It also offers transparency, allowing the customer to play an active role in the process and to see what is being validated. This fosters trust between the insurer and the customer. Despite the obvious benefits of blockchain for insurers, reinsurers, and customers, the industry has yet to adopt blockchain on a large scale. The primary reason for this is that blockchain adoption has until now required in-depth knowledge and skills in blockchain-specific programming languages. The limited number and high cost of hiring blockchain experts have rendered the technology out of reach for many businesses in the industry. Without access to the technology, exposure to blockchain and the ability to reap its benefits will remain limited for insurance companies.
How can these obstacles be overcome?
The key is accessibility to enable all parties within the insurance ecosystem to reap the benefits of blockchain and smart contracts. There is a dire need for a bridge between the blockchain technology and these industry players. That is why we here at Inmediate are continuously doing our development with blockchain so that we can provide the insurance industry with that ecosystem where Smart Contract Insurance can be transacted at lightning speed, full clarity, and at much lower costs than ever imagined. In conclusion, with a clear direction of blockchain adoption for the future, insurance companies will be forced to adapt or be left behind. The adoption of blockchain by the insurance industry is no longer a question of if but how.